BaFin Statement

BaFin has issued a regulatory statement that classifies Bitcoin and similar virtual currencies as a financial instrument for purposes of the KWG. This was followed by BaFin's warnings to consumers of November 9, 2017 regarding investments in ICOs and a related BaFin article published in the BaFin Journal on November 15, 2017. In addition to the BaFin warnings, the European Securities Markets Authority (ESMA) has issued a similar warning to consumers on November 13, 2017 with respect to participations in ICOs as well as an alert to ICO issuers requiring compliance with applicable laws. BaFin has published translations of both ESMA publications into the German language on December 11, 2017.

The BaFin statement of November 9, 2017 includes the following warning of the potential risks involved when investing in ICOs:

Price fluctuation and the risk having no liquid secondary market or no secondary market at all

The experimental nature of the technology and business models.

The difficulty for investors to grasp the technology and the risks of attacks and manipulation

Asymmetries of information between the investors and issuers, often relying on a "whitepaper"

The absence of guarantees on personal data

Systemic vulnerability to fraud, money laundering and terrorist financing, and the related risk of law enforcement actions against operators.229